NPS or National Pension System is a contribution-based pension savings scheme that helps individuals build a corpus for their retirement. It is a market-linked pension scheme where returns are delivered by NPS Pension Fund Managers. As a subscriber, you can select one of the 11 Pension Fund Managers (PFMs) in the NPS. You can also select the split between various NPS asset classes. NPS returns depend on the asset allocation and the pension fund managers you have selected. Moreover, NPS works best as a long term investment. The earlier you start contributing to the NPS, the longer period your money will have to grow.
Compounding in NPS
The NPS money is invested in the four NPS asset classes – Equity, Corporate Bonds, Government Bonds and Alternate Assets. There is no explicit rate of compounding in NPS. However, all these assets have growth rates.
If you consider the growth in the value of these assets over time, you can work out the compounding rate in them. This is given by the Compounded Annual Growth Rate (CAGR) which you can see in the tables below:
Returns of NPS Tier 1 (Equity) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 29.34% | 16.16% | 16.30% | 14.20% |
| Axis PF | 26.83% | NA | NA | 18.37% |
| HDFC PF | 27.63% | 16.40% | 16.84% | 15.43% |
| ICICI PF | 32.96% | 17.84% | 17.09% | 13.16% |
| Kotak PF | 29.86% | 17.67% | 17.18% | 12.52% |
| LIC PF | 27.98% | 17.50% | 16.26% | 13.67% |
| Max Life Pension Fund Management Limited | 30.38% | NA | NA | 16.39% |
| SBI PF | 28.41% | 15.90% | 15.58% | 11.53% |
| Tata Pension Management Pvt. Ltd. | 32.97% | NA | NA | 21.68% |
| UTI Retirement Solutions Ltd.
|
29.26% | 16.76% | 16.09% | 12.89% |
| Average | 29.56% | 16.89% | 16.48% | 14.98% |
Returns of NPS Tier 1 (Corporate Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 7.92% | 6.02% | 8.41% | 8.30% |
| Axis PF | 7.95% | NA | NA | 7.43% |
| HDFC PF | 7.91% | 6.21% | 8.62% | 9.27% |
| ICICI PF | 7.91% | 6.02% | 8.18% | 9.57% |
| Kotak PF | 7.85% | 5.86% | 7.60% | 9.26% |
| LIC PF | 7.70% | 5.81% | 8.31% | 9.03% |
| Max Life Pension Fund Management Limited | 7.53% | NA | NA | 6.84% |
| SBI PF | 7.77% | 5.86% | 8.22% | 9.59% |
| Tata Pension Management Pvt. Ltd. | 7.56% | NA | NA | 6.39% |
| UTI Retirement Solutions Ltd.
|
8.01% | 5.70% | 7.90% | 8.70% |
| Average | 7.81% | 5.93% | 8.18% | 8.44% |
Returns of NPS Tier 1 (Government Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 9.77% | 6.09% | 8.55% | 7.97% |
| Axis PF | 9.23% | NA | NA | 9.22% |
| HDFC PF | 9.50% | 5.81% | 8.51% | 9.10% |
| ICICI PF | 9.40% | 5.74% | 8.29% | 8.52% |
| Kotak PF | 9.81% | 5.97% | 8.46% | 8.53% |
| LIC PF | 9.39% | 5.88% | 8.73% | 9.86% |
| Max Life Pension Fund Management Limited | 9.43% | NA | NA | 9.26% |
| SBI PF | 9.71% | 5.78% | 8.35% | 9.10% |
| Tata Pension Management Pvt. Ltd. | 9.39% | NA | NA | 8.65% |
| UTI Retirement Solutions Ltd.
|
9.66% | 5.72% | 8.30% | 8.29% |
| Average | 9.53% | 5.86% | 8.46% | 8.85% |
Returns of NPS Tier 1 (Alternative Assets) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 9.43% | 6.96% | 6.22% | 6.44% |
| Axis PF | 6.92% | NA | NA | 6.55% |
| HDFC PF | 10.36% | 8.58% | 9.25% | 8.57% |
| ICICI PF | 8.55% | 6.28% | 7.21% | 6.85% |
| Kotak PF | 10.69% | 5.72% | 7.78% | 6.86% |
| LIC PF | 8.39% | 6.77% | 7.93% | 7.59% |
| Max Life Pension Fund Management Limited | 6.91% | NA | NA | -4.26% |
| SBI PF | 11.19% | 7.28% | 9.59% | 8.76% |
| Tata Pension Management Pvt. Ltd. | 9.10% | NA | NA | 8.03% |
| UTI Retirement Solutions Ltd.
|
5.70% | 5.96% | 5.69% | 6.09% |
| Average | 8.72% | 6.79% | 7.67% | 6.15% |
Returns of NPS Tier 2 (Equity) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 29.86% | 16.32% | 16.48% | 14.23% |
| Axis PF | 27.03% | NA | NA | 18.69% |
| HDFC PF | 27.87% | 16.44% | 16.85% | 13.85% |
| ICICI PF | 32.98% | 17.91% | 17.20% | 11.90% |
| Kotak PF | 29.74% | 17.64% | 16.98% | 12.05% |
| LIC PF | 26.74% | 17.12% | 16.05% | 11.75% |
| Max Life Pension Fund Management Limited | 29.57% | NA | NA | 20.92% |
| SBI PF | 28.07% | 15.84% | 15.63% | 11.41% |
| Tata Pension Management Pvt. Ltd. | 32.59% | NA | NA | 21.45% |
| UTI Retirement Solutions Ltd.
|
27.59% | 16.29% | 15.91% | 11.75% |
| Average | 29.2% | 16.79% | 16.44% | 14.8% |
Returns of NPS Tier 2 (Corporate Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 7.81% | 6.10% | 8.23% | 7.73% |
| Axis PF | 6.57% | NA | NA | 6.37% |
| HDFC PF | 7.93% | 6.04% | 8.40% | 8.58% |
| ICICI PF | 7.84% | 5.95% | 8.10% | 9.40% |
| Kotak PF | 7.66% | 5.64% | 7.85% | 8.60% |
| LIC PF | 7.69% | 5.76% | 8.65% | 8.54% |
| Max Life Pension Fund Management Limited | 7.00% | NA | NA | 6.61% |
| SBI PF | 7.59% | 5.43% | 7.74% | 9.14% |
| Tata Pension Management Pvt. Ltd. | 7.55% | NA | NA | 6.91% |
| UTI Retirement Solutions Ltd.
|
7.87% | 5.67% | 7.87% | 8.72% |
| Average | 7.55% | 5.8% | 8.12% | 8.06% |
Returns of NPS Tier 2 (Government Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 9.63% | 6.08% | 8.45% | 7.33% |
| Axis PF | 8.50% | NA | NA | 8.14% |
| HDFC PF | 9.62% | 5.75% | 8.33% | 9.23% |
| ICICI PF | 9.24% | 5.77% | 8.27% | 8.58% |
| Kotak PF | 9.53% | 5.85% | 8.22% | 8.29% |
| LIC PF | 9.43% | 5.95% | 8.80% | 10.08% |
| Max Life Pension Fund Management Limited | 8.17% | NA | NA | 7.42% |
| SBI PF | 9.79% | 5.78% | 8.24% | 9.09% |
| Tata Pension Management Pvt. Ltd. | 9.37% | NA | NA | 8.92% |
| UTI Retirement Solutions Ltd.
|
9.36% | 5.59% | 8.21% | 8.82% |
| Average | 9.26% | 5.82% | 8.36% | 8.59% |
NPS Interest Rates
NPS does not have interest rates because its returns are market-linked, like mutual funds. You can view the returns of the NPS in the tables above. However, unlike mutual funds, NPS is regulated more tightly by the PFRDA. Pension Funds cannot be invested in small cap companies or foreign companies. They are also highly restricted in the types of debt they can invest in.
Read More: NPS Calculator: Calculate Maturity Value & Monthly Pension
Tax on NPS Returns
There is no tax on NPS returns as long as your money is not withdrawn. In addition, you can make up to 3 partial withdrawals from your NPS Tier 1 account on specific grounds like purchase of house, medical treatment and children’s education. There is no tax on such withdrawals. Moreover, the NPS account matures at the age of 60 and you can withdraw up to 60% of the accumulated corpus tax free. This corpus includes both your contributions and returns.
You can also make a premature exit after completing 3 years in the NPS even before the age of 60. In such a scenario, you can withdraw up to 20% of your corpus which will be taxed at slab rate. The balance 80% has to be used to buy an annuity (regular pension). The annuity will be taxable at your slab rate.
FAQs on NPS Returns
Q. Can both private sector as well as government employees choose the Pension Fund Managers on their own?
No, government employees who are enrolled in the NPS (Central Government) or NPS (State Government) cannot select the Pension Fund Managers. This is set by the government for such subscribers. However, private sector employees, as well as self-employed individuals, can choose one of the eight Pension Fund Managers on their own.
Q. Are NPS returns for Tier 1 and Tier 2 accounts guaranteed?
NPS Tier 1 and NPS Tier 2 returns (NPS returns percentage/NPS return rate) are not guaranteed and the NPS returns amount depends upon the market performance of the scheme you invest in. However, the sooner you start investing in NPS, the higher your retirement corpus and pension amounts are likely to be.
Q. How are NPS scheme returns calculated?
NPS rate of returns are computed on the basis of the amount invested, the investment duration and scheme performance. You can make use of an NPS returns calculator to calculate your returns.
Q. Are the NPS returns taxable?
Post retirement, both lump sum withdrawal of up to 60% of the corpus and annuity investments are tax-free. Just the monthly pensions received are taxable based on the individual’s applicable income tax slab.
Q. How can I check the performance of NPS Tier 1 returns?
You can check your NPS returns through your NPS account. Log in to https://cra-nsdl.com/CRA/ using your login credentials and view your transaction and holding statement.